Governments often try to “help” people with price controls. Such “help” is most common during times of disaster (such as hurricanes). Evaluate whether or not price controls in such situations really help people. Think about potential winners and losers from such policies.

Expert Answers

An illustration of the letter 'A' in a speech bubbles

The quotation marks in the question suggest that the person phrasing the question considers price controls ineffective. While in many cases price controls can cause problems, in others they can be a useful part of a toolkit for recovery.

The first issues one should address in relation to this question are the specific items being subject to price controls and the companies offering the items. For example, if a single company has a monopoly on a certain medicine and suddenly raises prices far above the cost of production to take advantage in a crisis, price controls seem to be the only humane response. Many people would, in such a situation, say that there is something fundamentally wrong about profiting from a humanitarian crisis. Even outside of extreme situations, it seems morally wrong for a company to charge parents over $600 for the EpiPen, which costs only a few dollars to manufacture and might be needed to save the lives of children with severe allergies.

On a more generic level, some governments will institute price controls to prevent price gouging in times of disaster. However, the problem with this is that the control of prices may stifle supply and distribution. Take canned foods as an example; assuming that there is a demand for canned foods during a disaster, if companies cannot raise prices, they may not wish to incur the expense of transporting cans of food into disaster zones. Additionally, if prices are low, it may not be profitable for shops to pay the expense of portable generators to stay open. Furthermore, price controls can lead to criminality when customers--usually corrupt officials--buy items at controlled prices and then smuggle those items to other areas to sell at a profit.

Owing to these considerations, governments need to consider how to ensure that people suffering from disasters can afford basic necessities through a combination of price controls, subsidies, and aid which balances the need of producers to sell at a sustainable price with the needs of consumers.

Approved by eNotes Editorial Team